Upstart undercuts real-estate tradition
Seattle brokerage Surefield is slashing the total commission its customers will pay to sell their homes, joining a trend by some firms to undermine the industry’s status quo.
Seattle Times business staff
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In a bid to disrupt the real-estate industry, Seattle brokerage Surefield is slashing the total commission its customers will pay to sell their homes from 6 percent to 1.5 percent.
Surefield, a technology-centered startup that so far has sold only a handful of homes, joins a growing number of brokerages nationally that are shaking up one of the oldest features of the residential real-estate industry -- 6 percent broker commissions that are typically split evenly between brokers for the seller and buyer.
“A lot of industry observers have been surprised frankly that the realtor commission has managed to hold at 6 percent pretty much as long as anyone can remember, in boom or bust cycles,” said Rick Sharga, executive vice president of Auction.com, an Irvine, Calif. real-estate site backed by private equity, including Google Capital.
The rapid diffusion of technology into the real-estate marketplace is changing the entire model, Sharga said, in a way traditional discount brokerages couldn’t.
“What might be different this time around is the ability of technology to make the process more efficient, which would enable the brokerage to stay profitable while charging lower rates,” he said.
Listings of homes for sale, once the province of real-estate agents, are now easy for buyers and sellers to access through websites like Redfin.com and Zillow.com, both Seattle-based businesses too.
Surefield’s 3-D technology allows sellers to hold a 24/7 virtual open house for prospective buyers who have Internet access. Because buyers can “walk through” a home’s interior and exterior online, the company says it expects agents will handle fewer buyers who want to physically inspect the home and make a serious offer.
Given those efficiencies, Surefield expects it can still make a profit by lowering its commission to 1.5 percent of the purchase price. On a $500,000 home, a seller would pay Surefield $7,500 in fees, compared to $22,500 in fees to Redfin and $30,000 to a full-commission brokerage, the company says.
That fee, which sellers pay the brokerage, includes $2,000 to pay an attorney who’s agreed to represent buyers making offers on Surefield listings, or to the buyers’ agent.
If a buyers’ agent feels the $2,000 fee is too low, it’s something the buyer and their agent can negotiate, according to Surefield.
“When we look at real-estate commissions around the world, they’re much lower than in the U.S.,” David Eraker, Surefield’s CEO and previously a co-founder of Redfin, said in an interview.
A survey published in International Real Estate Review shows the commission in the United Kingdom averages 1.5 percent; in Singapore, 3 percent; in Australia, 2.5 percent.
The fact the 6 percent fee in the U.S. hasn’t fallen dramatically is noteworthy enough that the U.S. Department of Justice has guidance for consumers seeking to save thousands of dollars on commissions using “innovative brokerage options.”
Redfin’s brokerage was one of the first to challenge traditional brokerages by cutting the total commission to 4.5 percent — 1.5 percent to the seller’s agent and 3 percent to the buyer’s agent.
Since then, more brokerages have sprouted up that challenge the traditional fee structure. Seattle-based WaLaw Realty, started in 2009, charges a flat fee of $7,995 on all homes below $1 million.
“Most buyers and sellers out there simply don’t know you can negotiate the commission,” said Marc Holmes, WaLaw Realty’s founder. “They just don’t know it’s a possibility.”
WaLaw Realty, which says it provides all the services of a traditional brokerage, collects $1,000 upfront from buyers or sellers, and the balance is paid at closing.
“That commitment is huge because it separates the people who are kicking the tires and the people who are really serious about buying or selling a house,” Holmes said.
Another Seattle startup, Rebls (pronounced “rebels”), aims to match buyers and sellers before a house is even listed and then refer them to partner agents who are willing to accept a lower brokerage fee.
Rebls, which launched in King, Snohomish and Pierce counties last month, had seven agents listed this week, all accepting commissions lower than the standard 3 percent for representing a buyer or seller.
“We’re not trying to cut the agent out of the equation,” said Adriane Holter, a Rebls spokeswoman. The startup’s executive team includes a former Amazon.com lead
Agents are willing to accept lower commissions through Rebls, Holter said, because buyers and sellers have found each other already through the site’s matchmaking platform.
“Agents serve several functions — matchmaker, educator, negotiator, transaction coordinator,” Holter said. “Matchmaking is far and above the most time intensive.”
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Blue Nile courts new market
After some reluctance to marry due to the woes of the financial crisis, U.S. couples have been tying the knot with increasing frequency in the past couple of years, say top executives at diamond retailer Blue Nile, which makes most of its living selling engagement bling.
But another recent development may help the diamond retailer’s fortunes: the surge in same-sex weddings as they become legal through the land. Blue Nile has begun marketing engagement jewelry to same-sex couples in its direct email advertising, said CEO Harvey Kanter.
The email in question, sent out Oct. 16, depicts three sets of bands — one set sparkling, diamond-studded bands labeled “for her and her,” a combination of a sleek band and a more ornate one titled “for him and her,” and two unadorned platinum bands destined “for him and him.” The promotion also took place on social media.
Vocal support for same-sex unions has gotten another Seattle company — Starbucks — both a lot of accolades and backlash from conservative groups.
Kanter was careful to say that the campaign is not “a political statement” to weigh in on what remains a contentious issue — but simply an ad portraying how much value customers can get from Blue Nile’s products.
The potential market is big. Financial website NerdWallet estimates that the growth of same-sex marriage could add $2.5 billion to the $51 billion U.S. wedding industry. In Washington, same-sex unions could result in $82 million in spending, the site estimates.
David Binder, Blue Nile chief financial officer, estimates that 600,000 to 700,000 same-sex couples have already married, and more might do so soon (about 2 million couples marry each year in the U.S., Binder estimates).
“There’s pent-up demand,” Binder says.
— Angel Gonzalez
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T-Mobile chief not neutral on the net
T-Mobile CEO John Legere, known for his use of Twitter, magenta-accented clothing and F-bombs, went on a 12-tweet spree Monday after being called out by The Verge for his stance on net neutrality — the concept that everyone with an Internet connection should have equal access to all content online.
“Warning. Tweetstorm approaching. It’s a complex issue & since the @verge is asking, here we go on #NetNeutraility,” he tweeted out Monday.
The rant came shortly after President Obama called on the Federal Communications Commission to more heavily regulate Internet providers and treat broadband, including mobile, much as it would any other public utility.
Obama said the FCC should prohibit Internet providers from charging content companies like Netflix for priority access to customers.
As The Verge pointed out in a piece it titled “Do you want net neutrality or not, John Legere?” such a rule would endanger the legality of T-Mobile’s Music Freedom, which allows some T-Mobile customers to stream music without charging for going over data allowances, prioritizing some data packages over others.
As “the Uncarrier,” Legere has tried to make T-Mobile stand apart from its competitors — Verizon, AT&T and Sprint — but he seems to agree with his competitors that less regulation would be better for the wireless industry.
In his 12-tweet run, Legere said T-Mobile is a consumer advocate and supports net-neutrality principals, but he believes “less regulation = more innovation.”
“Like it or not, regulation can stifle innovation and the #uncarrier is all about changing this broken industry,” he tweeted.
Of the two choices for Internet regulation — Title II, which Obama was talking about Monday — and Section 706, which has lighter regulations, Legere tweeted that he favored “the 706 version, if regulated, because ... did I mention how much I love innovation?!”
In other T-Mobile news, for the second year in a row, T-Mobile will be the exclusive title sponsor for the annual fireworks show at the Space Needle — T-Mobile New Year’s at the Needle.
The Space Needle will be illuminated in T-Mobile’s trademark magenta — don’t call it pink! —- on Dec. 30 and 31 as a precursor to the New Year’s Eve festivities.
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Information in this article, originally published Nov. 15, 2014, was clarified Nov. 17, 2014. A previous version of this story left out pertinent information. Surefield’s 1.5 percent commission includes $2,000 to pay an attorney who has agreed to represent buyers making offers on Surefield listings, or to the buyer’s agent. If a buyers’ agent feels the $2,000 fee is too low, it’s something the buyer and their agent can negotiate, according to Surefield. .